Warren Financial Service in Lineville, Pa., employs a referral system that rewards clients for pointing their friends and family toward the practice. The company pays members of its Referral Club for referrals that work out. Warren Financial is a fee-only practice, and clients receive 30 percent of the first year’s fees for their referred prospects that become clients.
“People appreciate the fact we pay a significant amount of money,” says Randy Warren, the company’s chief investment officer. “It makes it well worth their while.”
Warren says there are several SEC compliance issues that must be met to introduce a program like this. Some of the more significant include:

  • People must sign up for the program and sign a contract that lays out the payment.
  • The prospect has to be informed of the referrer and how much the person got for that referral.
  • The prospect has to sign a consent form that says he knows he was referred.

“There are some administrative steps behind the scenes to do it according to the rules,” Warren admits. “We investigated it, found out what the compliance issues were, then rolled out a program.”
He says 10 percent to 15 percent of the company’s clients are in the program and it has been well worth it for the company. They remind clients of the club in their monthly newsletter and in their quarterly earnings letters.?